Good afternoon, everyone. Thanks very much for being here this afternoon. Welcome to VEON's Capital Markets Day. I'm Nik Kershaw, Group Director of Investor Relations. With me today, we've got Ursula Burns, our Chairman and Chief Executive Officer, Kjell Johnsen, our Chief Operating Officer, and Alex Kazbegi, our Chief Strategy Officer.
Together, we're going to take you through a little bit more detail around the company, hopefully, a little bit more information than you normally get at our quarterly results call. I'll just bring your attention to the disclaimer, particularly the forward-looking statements. I'm sure you're all going to read through that in a lot of detail, so thank you very much for that. Just on this slide, really, this is just the running order for today.
Ursula will come up, talk you through a little bit about the business, take you through our investment case, and talk to you a little bit about the past 18 months, which has been a period of quite some change for us, and we've made some really good progress.
After that, she'll hand over to Alex, who'll take you through our strategy framework, and then Kjell will come onto the stage and really talk through how we're actually executing on this strategy across our operations. In particular, Kjell's going to spend a little bit of time around Russia. For us, Russia's a market that, yes, it's got some challenges, but it's also got some great opportunities, and we want to spend a little bit of time talking you through that.
Alex will then come back, talk you through a little bit about the portfolio developments across our businesses, and then he'll also spend a bit of time talking about how we look at and how we view capital allocation from a group perspective and how we make those decisions around that. Ursula will come back on stage and take you through the outlook for the business, and then we'll move on to Q&A at the end of that. Thank you very much again, and over to you, Ursula.
Thank you, Alex. No, you're not Alex. You're Nik. Thank you, Nik. Thanks to all of you for coming and you spending a couple of hours with us to learn about our business. Before I get too into the presentation, I'd like to embarrass some people in the room, if I can. Members of my GEC, Global Executive Committee, who are here.
I'll start with Yogesh Malik, who is my CTO for VEON. Scott Dresser, who's sitting next to him, who is the General Counsel. Oleksandr Komarov, who runs my Ukrainian operation. He's my favorite guy in the company. Where's Vasyl? Vasyl, say your last name for me so I don't embarrass myself.
It's Latsanych, Vasyl Latsanych, who runs my Russian operation, my second most favorite guy in the company. When he performs like the Ukraine, I think I'll love him as much as I love Oleksandr. Who else did I miss? You'll hear more about Sergi Herrero. Stand up, Sergi. This is his second day in the company.
You can actually spend all of your time with him and ask him detailed questions about the company when we go into the Q&A. He doesn't know anything. He's just figuring out where the bathrooms are.
We're really excited to have him on board. We'll spend some time about him later. Where's Murat? Murat is my Deputy CFO. As you know, we're in a transition between the CFO old and the CFO new, and Murat is holding the show and the fort down really well for us. Thank you for being here. Finally, we have our newest board member, who is Kaan Terzioğlu. Did I do it right?
Close enough. Thank you. Kaan is good. As you know, he joined the board a couple of months ago, and he's dived right in, and he's just here observing today and just helping us out and learning a little bit more about the business. I'd like to start this discussion by picking up where I left off the last time that I spoke to a lot of our investors, which was our last earnings call.
At that call, I talked a little bit about our case for investment. Why would you invest in VEON? The reason why is that we are in markets that we actually are really good at operating, that have a tremendous amount of headroom for growth, particularly with the services and the investment cases that we have on a country-by-country basis.
It's a large footprint, a diverse footprint, and we manage this in three independent and different clusters. The first is Russia. It's the largest business in our portfolio. It is a fairly developed market. It is highly penetrated, four big competitors there. We're number three, but we are positioning ourselves and positioned in certain segments of Russia in a place that we can continue to win.
Alex and Kjell will spend some time talking more about Russia and what we're going to do in detail in the Russian market. The second set of markets is what we call our growth engines. There are four markets, Ukraine, Kazakhstan, Uzbekistan, and Pakistan.
Those are four markets. We call them our growth engines. Population growth, technology growth, just a young population. They're dying for services. They're dying for access. We are number one in these markets.
We actually hold that position pretty responsibly and manage that business very responsibly from the number one position so that we can continue to grow, to invest and grow and kind of distance ourselves from the competition. The third set is what we call frontier markets. The two largest are Bangladesh and Algeria.
I call them markets for the future. The demographics in these markets are very good. Growing population, generally young. There's some social, economic, just broad conflict issues in these areas that we have to pay attention to.
We option these markets. We play these markets from a position that we invest appropriately such that if we can see a turn in the right way, that we can invest for growth, and if we see a turn in the wrong way, that we can actually lower our investment. These are markets that we're serious about.
We have to be very careful about how we play them. We invest. One of the things that I learned when I came into this business was that the telco business is a little strange to me. You have to invest billions of dollars to just play the game well. You have to invest billions of dollars, and then you can actually start to earn money before anything else.
What I found out is that the reason why that's so is because if you do that well, you have an annuity stream that comes in almost on a short basis. We actually invest actively in our infrastructure to make sure that we are positioned well across the geographies that we play in, from the small all the way to the large.
We actually manage our business, and we're poised for strong organic growth as fueled by these investments. We are focused on assuring that we are fast and efficient in the business, so we want to make sure our portfolio is fit for purpose. We managed some of this earlier when we de-invested from Italy.
We used the proceeds from that to strengthen our balance sheet, but also, we focused on an emerging markets portfolio totally. You heard earlier, last couple of months, that we have completed the MTO for GTH, and we have some steps to go to continue to get that set of assets totally under our control.
These are two areas of portfolio focus and simplification that helps. We are also focused on cost. We've been talking about that a lot at the headquarters level. We committed to a 50% reduction in cost at the headquarters level.
We're well on path to do that, and I will say that I'm very confident that we can get even beyond that. We're focusing there. It's not only at the headquarters level that we're thinking about cost, it's at the operating company level as well. Every CEO of our 10 CEOs has a target that we measure on what we call cost intensity, and they have to reduce their cost intensity on a year-over-year basis.
This fuels and funds the investments that we make and allows us to actually deploy our capital in the right ways across the business. Efficiency, portfolio, good market, that gives us some returns. What do we do with those? We actually give some of them, I'll start with less, to shareholders. We invest in the business. We give you dividends and buy back shares if we ever wanted to do that.
We want to actually make sure that we manage the portfolio in such a way that's not a peanut butter approach. You just don't walk up to the counter and say, "I'm 10% of the business. I need 10% of the CapEx." Literally, every decision that we make is based on a return proposal. If that return is high enough, if that's good enough, and Alex will get into this in more detail, we will fund it.
If it's not, basically, you have to go to the back of the line and actually develop your case further and prove better. This has proved to be very useful for us in the last 18 months. That discipline actually flows its way all the way through how the country managers manage their countries as well.
We have a balanced approach in capital allocation, funding the business for the future, returning to our shareholders, and investing just in the core of the operations. One of the things that when I came into the business, one of the things that I focused on was to make sure that we had what I called operational excellence at the core of our business. The first time I spoke to you guys, I said, "That's the one thing I know how to do, which is to run a good business. Whatever it is, run it well.
Make sure that it is predictable, it is cost-effective, that it is staffed with the right people to actually make the right decisions. I think that you'll see over the last 18 months that we have a track record of actually predicting a set of outcomes to you, telling you what they are, and delivering them quarter after quarter after quarter.
I want to keep that up so that you can actually have confidence when we tell you that we're going to do something, that we actually do it. Investment case, good markets. We manage them by segment of markets.
By the nature of the markets, we actually generate cash, we generate EBITDA, and we actually deploy that to the right sources as we go along. Our markets are, as I said, they're big. They offer different attributes.
Russia, it's developed, large, big competitors, but a huge amount of upside. Big for us, half of our revenue, about half of our EBITDA. We manage it as a segment in and of itself independently, so that we can actually be very specific about how we invest and what in turn, returns that we're going to get. Our position here is good, but it has to improve. That's one of the areas that Kjell is going to spend quite a bit of time speaking to you about.
Our growth engines, young, fast-growing, urbanizing population. These urban centers are creating strongholds for us, so we can actually use and package some of our services. We are number one. We manage this, as I said, responsibly. We have some of our best leaders actually across the business, but here as well. These are good markets.
You'll hear a little bit from Kjell and from Alex about some of the work that we're doing in Pakistan and the Ukraine. If you were in the breakout sessions before, you'll see some of the work that we're doing in Russia as well. Frontier markets, they're at early stage.
I call these options for us. We manage them seriously. We expect returns, and you'll see some of the improvement that we've made over the last four quarters in both Algeria and in Bangladesh. They still have a long way to go. They can be significant markets for us as we go forward.
We want to make sure that we keep our options open, that we play them aggressively, and that we're good at the end of the day, if they start to turn to a more normal set of markets towards growth engines or cornerstones, that we are positioned very well. Now, VEON enjoys a strong data-driven growth business.
That business allows us to generate cash. This is what I was saying earlier. It's an amazing investment, kind of annuity stream business. We use that cash to fund our business. We use our cash to invest in what I call a world-class IT infrastructure. We have that in certain countries. We're investing more in countries. Russia is another example.
You'll hear about Russia again in this area, where we may have to put more CapEx in to bring our performance up to proper levels. We're committed and willing to do that because we actually do have the cash generation. We also invest to make sure that we can maximize long-term shareholder value.
You will hear a little bit more about our Ventures business, which we just launched. Nadeem Sheikh, who's here, who runs our digital financial services business under the Ventures business, is the first place that we'll put differential capital into that business to try to scale it at a pace that's different from what would normally happen in our telco confines. A lot of markets, 10 markets, very risky markets, very attractive, in order to run them with safety, we actually have to have a great management team.
I look at the management team from two perspectives. The one side with my 10 managers, you only see six of them on the slide here. They run the operations. They are the CEOs. They run the day-to-day business in the countries. They protect our brand, shepherd our brand. They take care of our customers.
They are the housers and the managers of all of our employees. They are the people who generate our license to operate in these countries, and they do a really good job. We have made quite a bit of change here. Kjell will tell you about this, or he has told you about this in the past.
We've changed probably five of the 10 managers, all for good reason, all upgrading skills. We are really pleased with this mix that we have now. I think that we'll see a fair amount of stability in this place for years to come. On the right-hand side, we're all about protecting the enterprise and the governance structure, everything from my legal structure to my financial structure.
We have a mix of what I call newbies. Who's a newbie, Alex? Becky would be a newbie. What I call the old and grizzled guy, which is somebody like Scott, who's been here for all of four years, which is, for us, kind of long. That mix is really good.
This is a place that you may see more change in the future, not because I have nothing planned, but some of these people have been in job for a little bit longer, and you'll have natural rotations and natural movements.
I think the combination of these individuals under a common structure, a common belief structure, a common set of ethical approaches to the business, and just an intensity around understanding the customers and the natures of the markets that we're in, I think, will present stability for us as we go forward to be able to match the opportunities that are in the marketplace.
In that regard, I want to actually talk a little bit about Sergi. Sergi joined us, as I said yesterday. It took us a long time to find him. I'm glad that we took the time that we did take to find him. His whole focus is going to be to drive the ambition that we have in this new set of businesses that we're in. Some started already and some that we're just looking at. These are close adjacencies. They're not going to be that far from our home base.
They will be country-led, so coming out of the countries, identified, evaluated, and kind of tested, and coming to our GEC and to the board to ask for additional funds to go forward with. Most obvious one, the one that we know most about right now and that has the most legs, is our DFS business in Pakistan.
We have some things starting in Russia in digital TV. It's all about assuring that we don't shut off, we don't box ourselves into being a traditional telco only, but we don't go so far afield that we can actually take big risks.
That's why in the countries and from a core of services that we know, based on data, a lot of these businesses will be based on all of the data analytics and the data that we have from our customers already. Over the last 18 months, we've been through a lot. It's been, I think, a watershed 18 months for us and for our business.
We've strengthened our emerging markets focus. We've simplified our structure, both GTH, Italy. We've enhanced our core. We've invested in IT infrastructures in our DBSS to enable big data. We've improved distribution capabilities. We've rationalized our distribution. We've focused a lot on our cost at both the headquarters and the country level.
There's, as I said, a lot to do there, and we're investing in new services to make sure that we are ready for the future, that we actually play some of the options and capture some of the value for the infrastructure that we've invested in. In addition, I think, through that time, you'll see that we've delivered consistently.
From quarter one 2018, we've ratcheted up our revenue growth, organic revenue growth. Our EBITDA has steadily improved. We've been able to invest CapEx where needed and still be able to actually generate enough free cash flow, excluding licenses, to actually deploy some of that towards our shareholders as we go forward.
This is, I think, a picture of just working hard at it and continuing to improve and be better at, and I expect for more of that to continue as we go forward. I talked a little bit about this. I always put this slide up because we had some curves in the road in these areas. I just want to make sure that we, particularly for the markets that we're in, for the 10 markets that we're in, we really have to earn our right to operate every single day.
We do that by having a foundation of what good business looks like, having a team that understands that, and actually looking towards the future to make sure that we make the right move. We are customer obsessed, we focus on innovation, and we have to be entrepreneurial, collaborative and what we call truthful.
This is the foundation for our business. Our ethical standards have to be at the highest level, and we have to think ahead a little bit and make sure that we are responsible in environmental, social, and our governance practices and our standards. We are really trying to step up the game here. We want to become publicly known in this area.
We want this to be part of our value proposition, as we go forward. I think that you'll see that it will serve us well. The investments that we're making here will serve us well. Today's presentation is structured around four topics. The first is how we position for growth. A lot of detail from Alex and then from Kjell, both in terms of market presence and business strategy.
The second is going to be how do we drive operational execution across our diverse and dynamic markets. The third is on how we manage our portfolio and what are the principles about how we do it in the short term and in the long term.
The fourth is how do we allocate capital and what are we going to use as the means for investment and for growth and for shareholder return, and how do we do that, and what's the mix that we'll be able to use on a go-forward basis?
Turning first to Alex to make sure that he lays the foundation on a strategy and a strategy framework. This is something that when we started it, we thought this could be just a paper exercise, and we want to make sure that it's not that.
Literally, it is the foundation under which we, as managers and the board, think about the business and actually think about how we will invest every single penny that we make, talent that we have, et cetera, to make sure that we actually are doing the right things. With that, I want to bring up Alex, and then he'll take it from here. Thank you.
Thank you, Ursula. Good afternoon. I guess we start still with the paper exercise first on the strategy. Today what we want to present to you is indeed our long-term vision for VEON and the strategy framework, how do we intend to achieve that?
Our long-term vision for VEON is a communications and a digital service provider, which enables customer ambitions, which acts as its digital concierge, guides through decision-making, and connects each with the resources that match their individual and business needs.
I think it's important that we're using the empower here, because typically, the telecoms in the past have been always enablers. We don't like the word enablers. We think it's the time that the telcos take an active role, and that's why we use the word empowering customer ambition.
Our long-term goal is generally to fuse technology with human behavior in a cognitive and predictive manner in order to come up with the products and services that reflect individual needs of our customers. To do that and to be successful, we think we need to go a step beyond using just the financial and human capital. We would like to introduce the three new forms of capital, if you wish.
One is the behavior capital, and that has been gathered by us over years through the data, which is the vast amount of data actually the customers do share with us. It's cognitive capital, which we create ourselves by applying analytics and algorithms over the behavior capital. It's a network capital, which is generated through growing the platforms which connect the services and the products which we generate tailor-made to our customers.
We think that using this proprietary analytics can give us competitive advantage by creating a clear customer value, and through that, we could own the relationship with our customers. That's the essence of our long-term vision, empowering customer ambitions. Turning to how we actually see the strategy framework itself.
We see our business generally consisting of three interlocking and interrelated sources of value, the so-called three pillars. The first pillar, of course, is our main bedrock of the business. This is the connectivity business. This is the voice and the basic access data business, which also has the first call on our capital.
The new services. These are generated via transferring the experiences of our customers, combining the latest technologies, especially with the big data insights. Last but not least is the future assets.
This is actually our long-term ambition to identify, acquire, and develop new ideas, services, and products which can extend our capabilities far beyond just being a connectivity provider into adjacent businesses. We think that representing our business with these three pillars, where each of our operating units will try to have parts of it in their portfolio, is the right way to go forward, to move forward.
This way of putting the triangle, if you wish, the strategy framework, also rethinks how telecom companies like VEON can create incremental value by effectively inverting our thinking around the incremental addition from each of these pillars. Clearly, the connectivity business, as we said, it's a bedrock of our existence. We will invest there, we will grow it, and it will change in value.
The new services, and especially over time, the future assets, have a potential to deliver great incremental value, both actually to the core business itself and on a standalone basis. In fact, what you see is not a triangle. It's actually a pyramid. The reason why we like the way how we look at it is because this serves all the stakeholders in the business.
The same triangle can be addressed to our investors, to the regulators and the governments, and to our own people. For the investors, that means that the cash flows we generate from the connectivity business, we can be redeploying into higher return and higher growth new services, and also into the long-term assets which have this embedded optionality in them.
To the regulators, we are offering the essential communication businesses, but we're also fostering the digital literacy and promoting new economic opportunities in the markets we operate. Finally, for our people as well, we deliver fundamental services to societies by which we broaden the social values of those societies. By embracing the common goals, we stretch our own ambition.
We're looking for the new talents, and we are embedding also the long-term thinking in the company, especially with the view of having the future assets. Of course, doing everything we endeavor to wrap everything in the typical, so to say, for us, using our culture and values, ethical, compliant, and sustainable way, how we want to deliver those services. The strategy framework clearly is a forward-looking roadmap, but the three pillars of the strategy are already visible in the businesses which we have already.
If you start with the connectivity business, a good example would be our Ukrainian business, where investment in the networks, combined with repricing of a simple tariff plans, with the active use of the customer value management, has been generating a very strong growth in the revenues. Moving to the next one, the new services.
A good example of that would be Beeline Russia, where we have the Beeline TV, one of our flagship products there, which delivers the personalized media experience and content to each of our customer. We have about 1.5 million monthly users.
George Held, who is sitting somewhere here, over there, has been showing you probably some of the examples in the back room and can continue doing so afterwards. The success of this business is already visible because we will be deploying the same platform in Kazakhstan and Uzbekistan.
Last but not least, the future assets, and that will be the first asset which will be part of the VEON Ventures. This is our business in Pakistan, the DFS, the Digital Financial Services. Nadeem Sheikh is also sitting here, and he can show you a bit more in the back room as well afterwards.
This business today has six million subscribers and has all the potential to at least triple the subscriber numbers over the next five years. With the targeted investment, it is a leading mobile money proposition in the market.
If you wish, it's an M-PESA of Pakistan. All of this would not be possible to be delivered without extensive use of technology. We've been investing in technology for a long time, of course.
In terms of digitizing the core, we started the process back already in 2017 and installed new capabilities such as the DBSS systems, the enterprise management systems, the data management platforms. Combine those with the big data does enhance the customer experience in two ways.
One is that in ecosystem way, when effectively we are transforming the medium through which we interact with our customers and going much more digital way. This is all the self-service, the online store, and so on and so forth.
Also in the product base, which is all driven by our big data capabilities and our ability to deliver to the customer exactly those tailor-made services, both in context, in fintech, in agtech, and lots of other adjacent territories. How do we measure our success?
One thing is to declare it, the other thing is to actually have the measurement to do so. We think the measurement can be done simply by applying three verticals, which is the adoption, usage, and success. They equally apply to the horizontals as well, to the connectivity business, to our new services, and also the future assets.
On the connectivity side, for instance, if you look at the self-care service, there the success can be measured not just by the revenue contribution but actually by the contribution to the cost base.
However, progressing up to the pillars in the new services and future assets, increasingly, the success there will be measured by contribution to the revenues or, especially with the future assets, what is the ability to crystallize the value out of whatever we created from the long-term assets?
Lastly, for me, before I hand over to Kjell, is how do we link the strategy framework, which is all these triangles, into the countries, which Ursula mentioned in terms of the blocks. We have Russia as a separate block, if you wish.
We have the countries with the very profound growth opportunities, Pakistan, Ukraine, Kazakhstan, and Uzbekistan. Then we have the frontier markets, of which we depict here, Algeria and Bangladesh. Overall, we would attempt for each of the markets to replicate more or less the triangle we have here.
Russia, here you could see it is, of course, having a very strong connectivity business, has widespread products in the new services, and the little arrow there shows that the future assets, which we haven't defined yet for the market, but could be defined, for instance, on the basis of the Beeline TV, that has an opportunity to become one of the future assets.
As I said, it has been already deployed in our own opcos in Kazakhstan and Uzbekistan. Pakistan actually has all three already in place. As I said, the third one is the DFS business, which we already identified as clearly part of the VEON Ventures. All the other markets in this cluster, they have the opportunity to go from the connectivity to the new services business at least.
Lastly, Algeria and Bangladesh and these frontier markets are the markets where we think that the connectivity business is probably, at least for now, is what we'll be focusing on. With that, let me ask Kjell to continue and give you more details in terms of how we actually run the businesses in these clusters. Thank you.
First, a couple of questions for you, Alex.
Oh, thank you. Sure. Should I say-
Alex, we're used to having you here in the audience.
for a long, long time. How does it feel to be on the other side?
Interesting.
Wow. Interesting.
I think I will wait for the questions, and then let's see how to handle them will be more interesting.
I have one more thing for you.
Okay.
Alexander. Ursula said Alexander is number 1 and Vasyl is number 2. Are we auditioning for number 3, or are we in the game at all?
I don't know. We seem to be below this game.
We-
Under the radar screen.
Yes. Well, I guess we just have to do our best. Good afternoon, everyone. Welcome. Thank you for coming here to share this afternoon with us and talk a bit about our positioning, talk about our connectivity business, and what's in it for us and for you. I would start by saying that we are now positioned for growth in a little bit different way than we were before.
You know we sold out of Italy, and as much as we like our friends in Wind Tre, that means that we are now a much more clearly defined emerging market company. And emerging markets should deliver a lot of growth and in different dimensions.
One of them is about, of course, the uptake of technology coming a bit later than in the first markets, China, U.S., Western Europe. And we try to illustrate it here in terms of smartphone penetration.
I'll just point out to you that we talk about LTE-enabled smartphone. That's the higher level. Usually, we only talk about smartphones in general, which includes 3G smartphones. What we see here is that within our markets, there's still a lot of growth to be had. The highest number of smartphone penetration in Russia is 35%, the lowest in Bangladesh at 7%.
Most of these markets are on the S-curve in the acceleration phase that fits very well where we are in terms of network rollout in most of these countries. We also see data usage picking up a lot, and we're happy to see good growth levels in data usage. We would also be very happy if that could turn into significant monetization in all of our markets.
That is, in some markets, a responsibility that weighs heavy on us, and we try to take that responsibility. In others, we need market leaders to take that responsibility. An emerging market player, still a lot of growth, not only because of the technology aspect. We talked about the population growth and other factors as well.
Take a couple of examples. Pakistan, country with a bit over 200 million people, secular population growth of 3 million-4 million, I think, per year. Good base for growth for VEON. Take Uzbekistan. The Soviet Union fell apart.
There was around 20 million people in Uzbekistan. Now there's 32 million people. That's a 50% increase in the space of, what is it, 25 years or so. A huge development. We expect over the coming years in this period to see another 30 million new possible customers within our footprint.
Obviously, as things progress, we will then see 25 million people starting using data services. One thing is to get people to get a handset. We also need to get them to use the data services. Of course, in many of these markets, there are still people who are unbanked.
Actually, not so many of them. In some of them, there are unbanked people. Pakistan is a great example of that. We have big possibilities from our initiatives in Pakistan. Also in the countries where typically people do have a banking relationship, there is definitely the opportunity to innovate and make life easier and better for customers of traditional financial services.
These are the things that Nadeem and George and others are showing you. If you didn't see it already, you can see it afterwards in the room behind. We come to digital services, which is why we're so happy that Sergi is with us today. Kind of to being the front man within VEON for helping us drive these digital services going forward. We expect significant growth in that area, and we already have a funnel that we can look into and further develop.
What can drive the growth for us? General economic development. In a portfolio of 10, there will always be some countries that do great and some that are in a different cycle. Overall, we should have a good potential with an economic development, smartphone penetration, general penetration of services.
Just remember that within our portfolio, there are people every day who, for the first time, get a mobile handset in their hands and use it and get access to the platform that the whole of humanity communicates on.
We are still into that. That doesn't happen very often in Western Europe if you exclude the fact that you give it to a child. You have throughout the whole population. We also see that the data usage is increasing. We are doing what we can to make that a profitable increase. Overall, if there is not a growth in usage, we wouldn't be able to monetize anyway.
This is a good development for us. The fact that the populations in many of our countries is young is good because age, high age, is a barrier to adoption. A young population will be more open for adopting new services and become active users rather than using just basic services. In many of our markets, we have very strong positions. We have positions where we can lead on.
We do see that in most of the markets, there is still room for basic penetration growth, so we will lead on for that. Where we see a need for maybe being even more pushy going forward is on developing high-quality networks.
The 4G train has basically left the station in a good way for us in most of our markets, and where we have seen the need for acceleration, we've taken those steps, especially throughout 2017 and 2018. We should be on a good track throughout most of our geographies.
I'll talk a little bit about Russia, since Russia represents almost half of our company. You deserve to get a little bit of an update on what's happening in Russia. We have the CEO of Russia in the audience.
He is, of course, available to take questions after this session if you would like to speak to him directly. Vasyl. What are the characteristics of Russia? Well, we all know a huge country, of course, great potential, great opportunities, a country with moderate economic growth, but also inflation coming under control.
Inflation is relatively low compared to where it has been in the past. What is bad about Russia is that they have the lowest prices for unlimited tariffs almost in the world. There is no reason for that.
The GDP per capita of Russia does not tell us that this should be the case. There is no other reason than competitive reasons. It is also not because the authorities are make it too easy for us. If anything, the industry should be very focused on getting these levels up a bit.
In the past, we used to speak about, and I did it also, a three-player market plus Tele2. What we have seen over the last couple of years with the heavy competition and unlimited price plans and the growth of Tele2 means that this is now, for all practical purposes, a four-player market with four players finding their positions, and we have to treat it as such.
We do see a lot of attempts at diversifying beyond core. Our approach to this, and I said it before, is we try more to develop internally. We think a lot of the acquisitions that happen in the industry outside are giving very limited returns. We hope to prove the market that it can be done right when Sergi comes up with his portfolio at a later point of time.
We want to be very cautious about trying to grow through acquisition. We want to develop the services ourselves. We've come a long way in terms of 4G penetration coverage, so the parameters are in place for a vibrant market. The challenge is to make it, of course, a market that makes people pay for the service.
Looking at the ARPU development, there are a couple of things we can take out from this graph. The yellow line is Beeline. Beeline has for several years tried to be focused on driving value in this market.
We can see it from the ARPU curve, which from 2016 and onwards has been increasing through a focus on CVM, through a focus on value, and trying to get out of the washing machine that we've seen in Russia. I think that picture speaks for itself.
Another thing you can see from that graph is that ARPUs are starting to converge. It may be a perception in people's mindset in Russia because of history and legacy that Tele2 is cheaper, but they're not. Tele2 is now at an ARPU level that is comparable to the other players in the industry. What does that say about the future of this market?
Given that growth has more or less stopped, and given that none of the operators are really growing very much in terms of customer base. It makes no sense to feed the washing machine monster.
What should happen here is that we see the curve starting to move up again. That is the only rational thing to do. The only rational thing in this market now is to focus on value again. Spinning customers is a waste.
I'll show you a couple of statistics more on that later. Slowdown in the market, predominantly because of extreme competition around the unlimited tariff plans. What do we do about that? Well, I can tell you this, we very much want to focus on value. We very much want to continue to do what we've done before, but we don't have customers to lose.
I spoke to you, I think it was in April or May, when we presented the first quarter, and said that one of the key tasks for us now is to stabilize the customer base. We've done that. The customer base is now more or less stabilized, which is a big thing. If the market is aggressive, we're going to have to be aggressive too. We don't want to.
We don't want to lead on to it, but we do have to protect our base. We want to do it intelligently. We want to try to reward some level of loyalty in terms of the way we structure our plans.
We think we've been able to make that happen. We're pretty sure about that. It's early days, of course, from the campaigns that we are showing you here, but the initial results look pretty okay.
Network. For several years, when I've been meeting people in events like this or on result presentations, we have talked about the network in Russia. The statistics over the last couple of years shows that we have a fast network rollout right now. We have more or less completed a major swap of Russia, of Moscow, where we have prepared ourselves for the next generation and basically densified quite a bit.
We're going to continue doing that if needed. Moscow is a priority for us, and we're going to have a strong network in the Moscow market, where we have traditionally been the leading player. We see a population coverage approaching 80%, and you see the metrics in terms of data speeds in Moscow. You can see we have made a big move forward.
Everyone will have optimization issues during swaps. That's why we are happy that the major swap in Moscow is soon behind us. It's more about densifying and moving on. Distribution. A couple of years ago, we made a big decision. We needed to get out of the reliance on multi-brands and take more control of our own destiny. We decided to insource half of Euroset, which was 2,000 shops. We shut down some of them for two reasons.
One of them was that there was proximity issues. We didn't want to have them too close to each other. The other thing is we wanted to signal to the market that there are way too many shops in Russia, way too many. Talking about active sales of well over 100 million SIMs in the past, it has dropped a bit, but not enough.
There's no reason why there should be 89 million SIMs sold. 40, 50 would have been enough in the normal circumstances. I think we have built a good retail for telco 2019. This is not the way the structure should be in 2023. This needs to change. By nature, we are not retailers. We are not here to run huge retail systems. If we have to, we'll do it. The industry should move away from those huge retail chains.
There are two ways of doing it. It is that people gradually, kind of in a balanced way, build it down to save an enormous amount of cost. We can, of course, take even more responsibility inside our company, which we will do. We will move forward much more with online solutions so that we can bypass from the cost elements within distribution.
This, and please tell my colleagues in other companies, this needs to change. On Russia, we still see some ARPU growth, but obviously if the unlimited price plans continue the way they do now, it's going to be hard to keep up a ARPU momentum. There is something a bit strange about 2.9% ARPU growth and 46% growth in data usage. There's glaringly obvious that we need to work more on monetizing this huge growth.
How many industries see that their customers are using so much more of the services during a year, and they're able to take so little back? This is quite important. In terms of devices, we made a step change when integrating the Euroset shops. We are now much more connected to being a device provider and device seller in the market than we were before.
We're quite proud of going back to the ARPU curves that you saw before, that we are able to execute well on customer value management so that it underpins the ARPU for the operation. We're also very happy that we did the Euroset transaction.
The alternative would have been much worse. While we are not at hard retailers, definitely the right things to do. More than 50% are coming through our multi-brand channel, which we will continue to improve and optimize.
We have almost 10% of smartphone sales. I would say even more importantly in the longer run, we're getting to 10% of online sales of devices. This is the future, of course. This is what we need to do more of. Network. The discussion about Beeline's rollout and build-out of network is in many ways over.
We are number 2 in the growth of LTE base stations. We are committed to investing what is needed to have a good network quality in Russia. The level we are at now is, in my view, more or less sufficient. If we need to revise it, we will revise it.
If we take Alex's pyramid and move up one step to the services part of the pyramid, we have redefined our primary interface with customers through self-service into our My Beeline ecosystem, which is a much more attractive proposition for a customer base. We have an active engagement.
We are also able to offer partner services over My Beeline. If you look at that MAU number at 8.4 million, that's quite a lot, actually, if you compare it to messengers and others who are operating in the Russian market. This has already become an important asset for Beeline. Alex took us through some of the numbers from Beeline TV, which is something we are proud of. We developed it largely ourselves. I talked about it before.
It looks much more like an Apple product than anything that was delivered in terms of set-top boxes in the past and has a much better usability also for the users. 1.5 million people using the service every month. Revenues, of course, Beeline is a big company, but $25 million in the first half of the year is still a lot of money in my world.
Fintech financial services. Speak to George afterwards. He is all over the place. We see good opportunities for developing more financial services in Russia. We are already supplying credit scoring algorithms to others.
We have many of the elements of the fundament in place in-house for developing such services. We're also happy to see, not only in Russia and in Beeline, that we have a good big data capability.
We are replicating that also to some of our other countries. Big data is not the future. It's already here, and we are using it every day for our organic business and for our partnership business. In all of this, we're going to be very firm in our focus on network optimization densification.
We need to continue to get that right. We're going to be a much stronger player in Russia going forward. That necessitates a strong network. We made very key decisions within fixed line two years ago, and that has led us to a turnaround within fixed. Fixed is actually now more of a plus than the minus that it used to be in the past, and we have a strong position also within B2B fixed from the old Golden Telecom acquisitions.
We are preparing for the future with our transport networks, and we have decided to be a bit more focused in terms of where we allocate our cap expense. It's clearly so that there is a number of cities that will give the best opportunities, and we will be clearly following the returns on that when we make decisions on where to apply our CapEx. In retail, we are day-to-day benefiting from the decision we took, but we still have a way to go.
Like I said, we are not by heart retailers, but we've come a long way in terms of integrating this so that the person who now delivers out the device or the SIM card is a Beeline employee that has a relationship to us and is not working in a multi-brand shop and handing out a SIM card based on who has the most exciting bonus plan among the three or four operators that work through that shop.
We think that is an important step. When it comes to pricing, over time, I think we were quite predictable in trying to move some of the price points in the Russian market. We have had to take more aggressive steps to protect our base. That has worked. We have stabilized the base. The message is clear.
If we see that the market moves towards lifting the price points, which are very low for a country of Russia's GDP, we will welcome that development. If we see aggressive moves continuing, we will, in a defensive way, have to respond to that. It's very clear, and it's very simple. Turning a little bit to some of our other markets.
We have, as you heard, defined four of our markets as growth markets. These are markets where we are the market leader, where we have a significant impact on how the industry develops, on its profitability, and how the pricing structures are set in the markets.
I'm going to start with Pakistan, which is our second-biggest operation. We are well underway with building out LTE in Pakistan. We see smartphone penetration picking up quite fast, actually very fast.
I'm very happy to say to you that the first half showed very good organic growth levels, talking about 22%. The fact that there is a penetration growth and the population growth has led to an increase of the customer base of more than 7%. These are all high numbers. We're talking about 60 million people using our services in Pakistan every day.
That's a lot of people. We also have come very far in building out our data network, and we have consistently good reviews when networks are compared in the Pakistani market. Our leadership position is built on a healthy and strong network position as well. 37% smartphone penetration when we wrote this shows that we are now on the acceleration phase of the S-curve, should be good opportunities for us to capitalize on that.
We're also doing more in Pakistan beyond the pure connectivity, and it has been touched upon here before. The big data platform in Pakistan is in many ways similar to or based on the learnings of Russia. We are extracting some synergies inside this group from working across the borders. We're building our own Jazz TV.
We see opportunities there like we also have seen in Russia. Of course, going forward, the effort we are undertaking within financial services is one of the most exciting things that we are dealing with these days in VEON.
Nadeem and Sergi and others, Amir in Pakistan, very interesting. We are really excited about following this going forward. I will not speak more to DFS. Ukraine, another market where we are a clear market leader.
We're setting the tone of the market in terms of trying to build more value into the 4G proposition compared to where we were on 3G. That works. We see that we are able to increase the ARPU, and you see it almost twice the ARPU from LTE compared to non-LTE. This is the way the industry should go.
Look at what we have here in the U.K. We saw BT launching, trying to benefit from the move towards 5G, but immediately commoditized by the other players. They have maybe 1,000 reasons for that that I don't know, and we've seen this too many times in this industry.
That every time we launch new capabilities, we discount them and we send them down the commodity immediately. That's not what we're trying to do here, and we will try to lead the market on in that direction.
Still a lot to be done. Our B2C position is extremely strong. I think we can do more on B2B. We can do more on FMC, and we have a little bit different approach to TV in Ukraine. We work with a partner. We have a good revenue share, but we have the option to also develop our own capabilities like we do in Russia and Kazakhstan.
Ukraine, very strong. Uzbekistan is a market that has changed dramatically over the years. I mentioned that they've gone from around 20 to 32 million people, which is quite amazing. It was also a closed market for quite some time.
We were not able to extract dividend. All of these things have now been resolved. We're able to freely take out our profits from Uzbekistan, which is a great move forward. We are rolling out 4G quite fast.
We are the market leader. We are well ahead. There are still a couple of things we need to have a dialogue with the Uzbek authorities about around spectrum and international gateways and these things. They are not critical to the short-term or medium-term outlooks of the business. Overall, the positives are far bigger than the challenges in Uzbekistan.
We will continue to work towards tax reforms. Tax reforms in Uzbekistan has come some way. I remind you that a couple of years ago, 41% of our revenues leaked out in tax. Luckily, that number has reduced quite considerably. Uzbekistan also has a sin tax that is paid every month, and that is the opposite, of course, of what you want if you go into an IoT world, into a 5G world. There is some hope.
I was in China last week, and I know that the next guy they were meeting with in this vendors after me was the prime minister of Uzbekistan. Hopefully they told him some of these things. What we have seen is that the monthly tax was cut in half by the end of last year, and we discussed that with the authorities last year.
Hopefully, we can continue this rotation over into a more healthy tax dynamic. We are basically in a position where we can do all the other goodies. We can do more B2B. We can do FMC.
We are well-positioned in Uzbekistan to take new steps going forward. The frontier markets. They have a little bit different characteristics. I will talk about some of them. Bangladesh was for some years a market where things were going down.
We made very clear investments into spectrum and networks two years ago, two and a half years ago. Eric and the team there have led a very clear focus strategy on where to build out in clearly defined areas. This has resulted in growth, profitable growth and control of the business.
Going from at the worst, we were down 10% year-over-year. Now we're up at a growth of 5%, 6%. This growth is also coming out at the EBITDA level, which is a strong performance, something we were happy to see in a market that still has a couple of regulatory challenges around fiber optics and towers. Still, we are able to operate under these circumstances and bring back to growth. Algeria, a little bit of the same story.
We have made a big move in Algiers, the biggest city, where we used to be a distant number 3, to take the fight back to the other players. That has proven very positive, and we are now growing our market share. Algeria, you read the news, you see there's a lot of uncertainty. There are political issues that we don't, of course, know fully to the end where they will play out. What is it we can do?
We can focus on our business. We are focusing on our network. We have the largest 4G network. We definitely have the best user experience if you try to use your handset in Algeria. We have also done something with the heart of the company or the brain of the company, so to speak. We have changed the whole BSS system, which is a big thing.
The whole organization, the whole system, is now much more nimble, fast, and has the opportunity to be very successful compared to the two other players in the market. Algeria could be a place where growth will be very limited going forward, but we are pretty confident that we will be able to increase our relative share so that our market share should be increasing in the Algerian market.
That was a bit on our connectivity business, our challenges, opportunities. Looking at our numbers, as Ursula showed us, we are back to a quite nice growth overall in VEON, driven by our growth engines. Also the places where we had challenges in the past have now started coming back to growth rather than pulling us down. Overall, I think a good set of numbers and, in most countries, a very solid operation that we can build on going forward. With that, I think I'll turn it back to Alex to speak.
Thank you. Thank you, Kjell. Let's go to the next section, which will be the portfolio view and how we allocate the capital. As you heard now, we are, of course, managing a very diverse set of assets. Continuously to monitor each of those contribution and assess each of those contribution to the value of the group is very important.
We rank the operating companies through quite a sophisticated grid, which includes the political situation in the country, the economic growth conditions for the country, the regulatory environment, the pricing environment, our own competitive position in the market, and clearly, our ability to generate returns in this market, which would exceed the local hurdle rates. In doing all of this, we always adhere to the same principles: simplicity, efficiency, maximizing the returns.
When it comes to the new investment opportunities or new investments, we also see their fit into our pyramid in terms of the three pillars of it, and ability of generating superior returns. To demonstrate that and to see actually how, in some way, we have a balanced actual portfolio of the assets, what we show here, only a little snapshot of how we address, again, those rankings.
We have, for instance, the one column which shows the revenue market share in the market. We are clear leaders in the cluster number 2. We are number 2 and number 3 player in the other markets. The regulation and the pricing environment, we rank them from good, which is green, to red, which is adverse or at least more challenging, if you wish.
In some way, these clusters actually comprise a balanced portfolio of yield, growth, and opportunities, which is embedded in the last cluster. The first cluster, Russia, in simple terms: large, mature, and cash generative. The return on investment capital here exceeds the weighted average cost of capital.
The strategy which we have here, it's to have the incremental investment and deliver growth. The second cluster, which is the growth cluster, this is really sitting in a sweet spot for the rapid development of the new services.
Here we have the consistently high returns on invested capital above the local hurdle rates. Hence, the strategy here would be to consolidate the leadership and grow the new service revenues. Last one, the frontier markets. Here we have much more shifting conditions, market by market and time by time.
Returns on invested capital here tend to be in line or even sometimes below the weighted average of cost of capital. Here the strategy is to stabilize, opportunistically invest in markets where we see the opportunities time-wise, and also to monetize if these opportunities arise.
The capital allocation, the principles of capital allocation clear for everybody: to match the ability to invest with our capital structure and with our desire to also share the money with the shareholders.
The CapEx decisions which we are making here, they are also governed by the same, looking at the attractiveness of each of the markets, opportunity by opportunity, and looking at expected time-adjusted returns on invested capital. Meaning that payback also, of course, plays a big role here. The CapEx which we look at addresses all three pillars which we have.
Starting from the connectivity, we invest there to support and enhance the fundamental value of our business which we have. We invest in new services to deliver growth. Lastly, we invest into future assets to build the long-term value.
Our overall goal is to have a positive real growth in EBITDA, the return on invested capital above the hurdle rates, return excess cash to the shareholders while maintaining the appropriate capital structure.
By that I mean the net debt to EBITDA ratio of around two times, or if you adjust for IFRS 16, 2.4 times. Going back to our triangle. If you look at the triangle, it allows us also to look at our returns and financial successes along the different three pillars. The connectivity generates cash. Here the purpose is to maximize the cash flows through baseline CapEx investments.
The main KPIs here from this part of the business, if you wish, it's providing the cash for dividends, for reinvestment, and providing main pillars for the guidance of revenues and EBITDA. The new services, the purpose here is to grow profitability, deliver returns on invested capital, and that is achieved through the growth CapEx.
The main KPI here to achieve equity rerating. Last but not least, the future assets. This is mostly targeted investments, balance sheet investments. The purpose here in KPI is to crystallize the value either through monetization or at least through getting an independent valuation of the business as it scales up.
This allows us to look at our business beyond just the growth of the revenues and the EBITDA metrics, but also in terms of creating long-term value for the shareholders. How do we invest into the future?
You can look at it cluster by cluster or from the group point of view. The first column, it's cluster by cluster. Here, for instance, in Russia, the focus would be on the network coverage, improving the quality, and of course, satisfying the Yarovaya regulatory requirements. In the growth markets, we focus on consolidating the leadership in LTE and growing the new services.
In the frontier markets, we're looking at investing into critical network capabilities and mostly looking at the shorter maturity opportunities. Now, if you're looking at the priorities from the group point of view, it is about the network needs, including the spectrum, the new rollout of the services, the LTE or the fixed line, be ready for the 5G, do some preparatory, so to say, no regret moves into 5G, digitizing the core, and clearly also investing into new revenue streams.
If you want to depict that, so to say, in a very complicated pictures chart, what this is doing is basically a snapshot of the range of opportunities and their ranking within the group, how to evaluate them according to market attractiveness, which is on the left-hand side, and on the horizontal line and the payback.
Each number here corresponds to an individual investment opportunity for a specific country, all color-coded by the type. What we aim to do, of course, is to stay above the curve, which means that we are preferring clearly to invest in the markets where the opportunity is more attractive and mostly favoring the investment horizon where the payback is quicker. Maintaining the appropriate capital structure, of course, is a centerpiece for our company for a number of reasons.
One of them, generally to manage the proper capital structure to decrease the overall cost of capital as well. Generally, the governance constraint to the leverage is about 2 times net debt to EBITDA, that's pre-IFRS, which we are currently, of course, achieving despite the fact that we have quite a lot of growing CapEx trends.
We actively manage debt maturities. You can see they are about two and a half years now. The purpose here is to increase the debt maturities and to decrease the overall cost of capital.
We also managed to redistribute, if you use the FX exposure of our debt portfolio, and now almost 50% of our debt now is linked to the RUB instruments. Much better link to the local currencies where we generate our revenues. On the cash upstreaming, Kjell mentioned also in his presentation that we have now no restrictions in Uzbekistan.
Luckily also in Ukraine, no restrictions either. Significant improvement in the situation in terms of the cash upstreaming to the headquarters level. Russia and Kazakhstan have been and continue to successfully upstream cash and through various instruments which are available there.
Finally, we're happy with the GTH transaction, which simplifies the entire structure and clearly brings us much closer to be able to manage the cash upstreaming from those opcos into the headquarters more efficiently going forward.
That brings me to the short-term outlook, which I wanted to discuss for next 18 months. What we see here is several clear investment opportunities. Russia is a clear strategic priority in both the connectivity and in terms of new services.
Some targeted investments here to match the quality of the network with the quality of the services and the products we already have is clearly something which we would like to pursue. Secondly, in Pakistan, there will be a market consolidation opportunity, not market, but it will be our business consolidation opportunity coming next year through a call and put option with our partner, Warid. Of course, that's something which we need to consider.
Also, in Pakistan, we're looking at the DFS that has a clear and immediate market opportunity, which again, we don't want to forgo and have cash and availability to invest there. Kjell discussed and showed you a number of the new services which we are developing in the market. We want to continue that process and also have more availability to invest in those as well.
Finally, we need to be ready to the 5G because clearly, luckily and hopefully we will not have to face it anytime soon. The licenses will come our way one day, and it's good to be prepared for that. For all of this, we clearly need to have greater financial flexibility, which brings us to the next point, which is our dividend policy.
Our dividend policy, as you know, has been to pay progressive US dollar-denominated dividends, and we've been doing it throughout the last two years. The current policy links this payment to the non-revenue-generating currency, and of course, fails to accommodate FX moves between our functional currencies and US dollars. That has been producing quite a lot of headwinds in terms of us being able to generate the equity free cash flows.
As a consequence, the board of directors has reviewed the current dividend policy alongside whatever the investment opportunities I already mentioned, and determined that it is worthwhile to change this dividend policy to allow us, as a management, more financial flexibility.
In simple terms, the new dividend policy, which will be introduced from year 2020, will target paying at least 50% of the equity free cash flows after licenses. That will be subject to, of course, the board of director approval and review, and subject to the midterm opportunities, investment opportunities we see in the markets and the group capital structure. To remind, the capital structure we have in mind is to have the net debt to EBITDA about 2x on a post-IFRS 16 of about 2.4x.
Now, we understand that this new dividend policy provides less visibility, if you wish, in terms of predictability of actual dividends for the next years compared to the previous one. I think there's three things which we need to keep in mind here.
First of all, we do see immediate growth opportunities and investment opportunities in our markets, and we don't want to forgo them for pure lack of cash. I think this will be wrong in terms of creating a long-term value for our shareholders.
Secondly, we're very committed to the strong balance sheet and to a prudent financial discipline, and as the second reason why we don't want to extend it. Lastly, we are managing this business to maximize the long-term value, and I think that is in the best interest of all the shareholders.
Hence, we require this financial flexibility and that's why we have this new dividend policy. Now with that, I would like to pass the floor back to Ursula to summarize our outlook for the business. Thank you.
We've shared a lot today, and there's lots of information. We'll take your questions after I wrap up. Then after that, you can go back and look at some of the new services that we have out there. We've covered a good deal this afternoon around these four pillars, these four themes. First, we're positioned for growth. Kjell and Alex went through market by market, and we're positioned for growth.
We have a strong position in most of the markets, and lots of opportunities to play across the spectrum in many of the markets that we do business in. We are managing our balance sheet and all of our investment priorities along the lines of being able to actually return value to our shareholders. We have an execution record that I think is building, and has a solid foundation, and it's continuing to build.
Alex just went through capital allocation for you, and we'll definitely get into that in the Qs and As. Finally, as I said, we talked about the first half of 2019, a good two quarters. At the end of the second quarter, we talked to you about what we thought the rest of the year would look like, and we gave a little bit so that we have upside probably in revenue and EBITDA.
What I would like to do today is to formally update our guidance in the EBITDA area. We had guided to low to mid-single digit EBITDA growth. What we are re-guiding now is for our 2019 guidance for at least mid-single digit EBITDA growth for the year. That, I think, is a quantification of the confidence that we have in this year's cash flows and profitability.
All other guidance will remain unchanged for now. With that, I'd like to actually invite my colleagues up on the stage for questions and take them, engage you guys, Kjell and Alex. Let's get some chairs up here. Why don't you stand up and move around a little bit?
There will be some roaming mics going around, so if you do have a question, please just put your hand up and I will pass the mic so that we can get it to you on the audio as well. Thanks very much.
We'll just ask the questions. I'll field them and hand them over to my colleagues, either on the stage or in the audience if it goes that far. Where's first question? Please say your name too, and let's go.
Herve Drouet from HSBC. My first question is, for the frontier market assets you have in the portfolio, which maybe is the most challenging for you compared with your capital structure, et cetera, do you think there is potential exit strategy if there are some issues in term of bringing them back to where you would like them to be? Especially in line with your strategy, you highlighted, and your capital allocation.
That's the first question. The second question on your future assets, I was wondering, at the moment, the way I've got it been presented is mostly you are focusing on your own customers. I was wondering for you, when you see those future assets, those future services, is it just for your own subscribers? Or are you going to move more towards a strategy where you provide services across, even for your competitor subscribers?
That's good. Both questions are really good. Why don't you take that?
I'll start on the first. When we talk about the frontier markets, they are as a whole and basically individually also, they are self-funding. The business runs itself. In some of these markets, we extract quite significant dividends.
For example, Algeria, we take out a real amount of cash there. The choices we make about them going forward would then be strategic choices. It is not because we have to do anything about any of these markets. We can continue to develop them. They generate enough cash to sustain their business, and also as a group, deliver cash back to VEON.
One of the things I've said many times before, three times I've been in front of investors, is that for these markets in particular, but almost any market in our portfolio, but for these, it's all about opportunistic approaches as well. If we are not in love with any place per se, we're in love with the returns that they can get to us, how well we can operate it, et cetera. It all depends on what's presented to us as we go forward.
As far as the second question, it's a really good one. To start, we're going to start close to home, right? We're going to actually play where we know, but there is absolutely no reason why or no necessary intention to limit ourselves to our own geographies. That would be not the best approach. I think you could say we'll start there, but we'll go as far as the market opportunity allows us to go for the investments that we're making and the services that we provide.
If someone in Pakistan wants to use our financial services, we will not force them to be a Jazz customer.
Jazz customer at all.
Even though Jazz has the best network in that country.
Yeah.
Many of these opportunities will be available to people who are not necessarily customers of our mobile network.
Let me just say one other thing. We're not limiting it.
Yeah.
Meaning that there's no direct correlation between the service that we provide and the customer that we use, unless you have to sign up for something and we'll allow them to do that. Yeah.
Hi there. Afternoon. It's Stella Cridge from Barclays Research, and I have a couple of questions, please. The first is, can you just outline what the terms are of the option in Pakistan in terms of when it kicks in, how it's valued, and what you might be expected to pay for your stake that you don't currently own? That would be great.
The second question, I noted the comments about the debt profile and the cost of debt. 2.5 years average maturity is fairly short. I was just wondering, is there anything that you're waiting for before you go ahead and look to extend the maturity of the profile or reduce the cost of the debt? Perhaps the GTH transaction, something like that?
Yeah. You can start with whichever one, and then you can finish the other one.
Okay. Yeah. I can, well, I can do both.
Please.
On Pakistan, it's very simple. If you look at our disclosure, the form, whatever it is, the 20-F, you will see that the value of that was put there $300 million. The option is kicking in sometime beginning from April next year. We definitely consider it, but the terms and whatever it is, it's very unclear, too early to discuss that.
In terms of the debt, yes, of course. This is the good window opportunity now in the market, so clearly we are considering. If we find that it is advantageous to us to raise or refinance now and extend the maturities by also decreasing the cost of capital, cost of debt, we will do that.
Now Alex answered the strategic part of it. I just want to say from an operational point of view that when it comes to the cooperation and the partnership with the Sheikh Nahyan and the Dhabi Group, that goes really excellent. It's a very good partner, very good relationship.
Thank goodness. Another question? Okay. Let's go there, and then we'll go there.
Oh. Andrew Evans from Schroders. You touched on one of the problems that the industry has faced over the last decade or so, which is introduction of new services, immediate commoditization. Invest huge amounts of money, give it away for free.
Large amounts of volumes, cut your prices. You didn't really go over how you're going to keep prices higher or growing or ARPUs growing going forward, basically to get the return on the investment that you've made. Can you provide more color on that?
I think you see the structure of the presentation. It talks about different groups of companies. If we start with those four that we call the growth engine, we are in those countries the market leaders. It means that we set the tone. The market leader has a huge responsibility for setting the tone of the market. We see that in countries like Ukraine, Kazakhstan, Uzbekistan, and Pakistan, there is some traction from this.
I showed you an exact number from Ukraine, where we see the differential between an LTE and non-LTE ARPU. We're going to try what we can do to lead the market in that direction. Now, in a market like Russia, we are number three. We're a huge company with lots of customers, we're still number three.
Our story was consistently built in what we did in the marketplace, in what we communicated to the marketplace, what we said to the media, that we wanted to set that direction there. Of course, that takes an effort, especially from the market leader. There can be 1,000 reasons for this. I'm not blaming anyone. They make their own strategy, and that's fine.
We alone, as number 3, cannot drive that turnaround in the Russian market. I think there is a good hope that that can happen anyway with a convergence of ARPUs because also for the player that has been profiting from the price perception that that is wearing off when you de facto are charging more or less the same as the others.
You will be hurting your own long tail if you're doing very aggressive behavior, and that should have a disciplinary effect. That's, of course, for others to conclude on. We have also seen, even in a frontier market like Algeria, where for a long time there was a price point around DZD 1,000 that was very important.
We saw a lot of effort to establish DZD 500 as a price point. We tried to resist that and push back, and we see now that that abating a little bit. It's not as strong as it was before. We now even see more traction on price points around DZD 1,500 and DZD 2,000.
It's early to call it a strong trend, but at least it shows that if you're willing to try to set the direction, you can get others to follow over time. That is at the core of our value creation strategy in VEON, to try to move the industry in that direction because there have been made numerous mistakes over the last 15 years.
The other thing I would add is that this trifurcation that we have in how we actually look at the market of these core services, the mid-range services, and the new. It's really important that we manage the business that way inside. It may not seem like that big a deal, but the thing that we don't want to do, particularly for the top-end services, is to actually just sweep them into the old telco model.
We literally are going to set those businesses up, those opportunities up, separate from using some of the assets maybe of, but separate from our telco assets so that we can differentiate them from a value perspective as well. It's really important to do that, or as you say, it'll just get swept. It's all in there, and it's not a reasonable way to get a return for the business. It creates some structural challenges for us, but I think it's definitely worth the effort.
Maybe just while you're pausing, Mike, there's a question on the webcast. Maybe we can take that question.
Then we'll go to you and then to you.
All right.
Over there, too. Got it.
Is it coming through? Yes, we have a question from the call operator. Could you please go ahead, please?
Yes. Just as a reminder to all participants, it's star and one to ask a question. Our first question comes from the line of Ivan Kim from Xtellus Capital.
Good afternoon. Two questions from my side, please. First on the dividend policy. It clearly suggests that the dividends in $ terms, in absolute $ terms, that we should expect might be softer than what we saw over the past couple of years.
I was just wondering, is the 50% payout ratio, the policy says about it as a least number, of course, but are you going to still try to at least maintain the dividend that VEON paid over the last few years? That's the first question. The second question on the capital allocation. Is it possible to quantify some sort of limits or amounts of capital that you want to allocate to the new services and the future assets? Are you going to do any M&A within that? Thank you.
You take both over the top.
Okay. Ivan, we were asking for a flexible dividend policy. We have now a flexible policy, which means that if we want, we don't need and we're not restricted to pay 50% of our equity free cash flows after licensing. We can pay 200 if the situation allows us to do. As we said, we have constraints in terms of the overall capital structure, which we don't want to exceed the 2x target.
Specifically for the reference to the past dividends, clearly, I think that the board, every time they will convene, will look at what has been in the past done and take that into account. I think I probably should not say more, because at the end it's the board's prerogative. That will be clearly one of the, if you wish, numbers, which the board will be considering when deciding on the exact amount of the dividend.
Second.
On second question in terms of the allocation. There is no specific allocation now, just to give maybe without revealing too much, we're not talking $100 million. We're talking possibly tens of millions. I would say every step we will make in terms of whether it's the future assets, whether it's new services, as I said, we have a grid, how we look at the capital allocation.
We have a grid, how we estimate and evaluate each investment. Each of them will be evaluated separately. There's absolutely no intention for us to have a large capital allocated specifically for arbitrary pool of investments. That is just not going to happen.
If you look at Beeline TV, if you look at big data platforms that we're using today, if you look at our digital financial services platform in Pakistan, but we have this platform in other countries as well, that has all been funded within the business already today. That part will continue. We'll continue to manage the funding out of that business that way.
The thing that is the most important is for the venture businesses, whether or not there's going to be, I'm hoping that there is, a request for a significantly larger amount of money comparative to what we did before.
If it comes forward in the right way, we will absolutely make a decision to fund that. The intention here is not to actually play a little game. The intention here is to practice quite a bit. That's what financial services did in Pakistan.
They get to the point where they're pretty strong, and we will look at an investment that's an outsized investment if it is appropriate and we can see reasonable return. That is not in our plans today. We've been working this quite a bit, and we think we can cover it pretty comfortably in the tens of millions of dollars in the short term.
On the dividend, one of the things that we talked about at the board a lot, and one of the things that we talked about at the management team, is this idea about progressives. Progressives locked us into a very tight corner. We had one thing that we had to do before we did anything else, and that is essentially raise the dividend. What we're trying to do is not cut it. What we're trying to do is actually give ourselves more flexibility.
As Alex said, if we can actually do all of the things that we want to do, talk to you about it in the marketplace, talk to the board about it, obviously the management team about it, is we want to actually give an attractive dividend to our shareholders while we also invest in the business on a go-forward basis. It's not a precursor to we're just going to cut it. It's a precursor to giving ourselves more flexibility. There were some others. I just want to make sure I get the order right. One, two.
Thank you.
Three.
It's Oliver Mihajlovic from Seven Pillars Capital. I'd be curious if you could be a bit more explicit about how the new strategy is different from the old VEON, because to some extent, this does seem like a U-turn. To hear terms like digital concierge reminds me a bit of the old VEON.
Question two, regarding Russia, it would be helpful if you could address a bit the strategic rationale of that market and why VEON should be in that market. Has the board considered an exit? Is that an alternative? Number three, I'm just curious in terms of the free cash flow guidance, you give it before licenses, but the dividend is after licenses. Can you give us some sense of what CapEx you expect to spend on licenses over the next three to five years?
I would like to start with the Russian question first and just answer that. I'm going to start. Russia is half our business. It's cash generative. It's strong, it's good. While it may not be as good as from a growth perspective, our core four, it's a big piece of our business, and we run it fairly well.
I would say as a member of the board, not speaking for the board, as a member of the board, it'd take a lot for me to think about selling it. It has to be a pretty good offer out there. We run this business fairly well. We're going to invest to actually improve it. I think that we have a good base to do that from, including the services. I'm pretty confident. Vasyl can get out of the room if he gets nervous about this, but I'm pretty confident in our position there.
Yeah, I think it's the old thing. Is the glass half full or half empty? Okay. If you look at those, I showed you some ARPU trends. I showed you some comparisons of what it costs To use data services in Russia. We know approximately where Russia is on a GDP per capita scale in the world.
You could be super pessimistic and say that the whole industry is not going to be able to do the right thing, or you can say that we have been through a phase where one player has grown into becoming a part of a club of big four, and that the revenues that the individual companies derive from the customers are starting to converge.
If the glass is half full, then we can easily see potential for a RUB 50-RUB 100 upswing in the ARPUs in Russia in a relatively limited amount of time, because in terms of share of wallet, the purchasing power is still available to fund that.
Now, that depends on a number of factors, and I tried to outline some of them. It's in a way, half full or half empty. We kind of choose to believe, because we are more optimistic about the world, that the glass is half full.
Second question was on past versus future from a "digital." First of all, the way that we approached our digital forays in the past was, I would say, quite publicly wrong-footed. That was a center group that was trying to develop a flat, fixed platform for 10, 11 at that time, maybe even 12 at that time, different countries with a pretty big bang kind of approach.
Without knowing a lot, I would've told you that's probably not going to work very well. The approach here is very different. It is extremely market specific, and it is scaled to the opportunity. We don't write a check for $150 million and say, "Go off and try to find a home for this." We listen to the market. They have to do quite a bit of work to get it to the point where we'll actually fund anything differentially.
DFS in Pakistan has done that already. A clear set of customers, a clear value proposition. Number one, you name it. We are literally there. We're operating. What we're funding is not an idea. We are funding an already running business, and we're trying to actually fund it to put a rocket behind it, not to just think about things. Every foray that we go into will have that kind of fundamental base.
It has to go through that work before we just, like I said, before we wrote a check and said, "Please find a home for this, and please develop something." This is market by market, and it is with a fair amount of work and ownership of the local markets in developing the opportunities before Sergi and his team can come in and say, "Yep, I'll look at it, and then we'll try to fund it."
Interestingly enough, there are more of this type of activity than I thought that there would be. Everywhere, you'll see some of it out there that people are looking for, our people are looking for ways to use the assets that we have, primarily customer information and customer preferences and technology to put it together and see whether we can fund it in such a way that's differential. I think it's very different from the past. From the past. The risk is lower, and the ability to get a return is significantly faster.
That's for sure.
If I can add to that also. That's also the matter of the processes and, if you wish, how the process is structured. In the past, it was cash comes first. You guys figure out what kind of products you will develop with this cash and try to apply it globally to all 12 markets. Here, it's completely different.
You guys come back to us, tell us what are the products which are appropriate for those markets, do they have the scalability opportunity, and ask us to invest in those products. Then we will decide on our capital allocation whether that's the right decision for us to do or not. Completely different process.
And so the-
And-
Go ahead, sir. The third question.
The last question is that basically the difference between license and investments is very simple. Investments are discretionary. Licenses are part of our business. We just cannot conduct business without having licenses or buying them. For us to look at the equity free cash flows, which we generate before licenses, is just the wrong metric. This is part of our day-to-day ability to conduct business.
Licenses ebb and flow, and when we have to do them, we'll tell you what they are, so that's why we need the flexibility.
Robert, would it be fair to say that in years where there are big waves in terms of licensing, the payout ratio would be much more flexible than taking the situation in a year where there is a big spread of license to go up in terms of that percentage that is paid?
Let me address it differently. Maybe if you just basically look back for 10 years, average annual payment for licenses was about $250 million. That can happen in one year, could be $400, the other year could be $120. That's different.
That needs to be matched by whatever the other investment opportunities we have. What kind of capital structure we have. It will never be exactly the same. If you take normalized, $250 million was in the past 10-year average what we paid more or less every year.
Yeah.
Where was additional?
Thank you. Alexander Vasyuk from Prosperity. I wanted to clarify, outside of those possible opportunistic acquisitions and/or perhaps investments in the new ventures. How do you feel about the ongoing capital investment in your existing operations? Is there any reason to suggest that you might need to step up your investment in the core network infrastructure, or are you happy with the existing level?
In total, let me just And then you can take it.
Sure.
Total, I think we're happy with the existing level. In total. We'll have to make some shifts, obviously, this is pre If anything exciting or miraculous happens in 5G, and it happens sooner than we're thinking, obviously that would change this discussion a little bit. We don't foresee that. We spend quite a bit of time in understanding the trends in 5G, and we think that we have that comprehended. In total, I think we have it about right.
Yeah, I agree. We are more or less where we should be, and if a small acceleration here and there, you'll be talking down into $ tens of millions, not more than that. At the level where we are now, we're pretty comfortable.
If you look at Russia specifically, it feels like you've been quite a bit behind your competitors in terms of the level of investment over the last few years now. Do you feel quite confident that you are more or less on par vis-à-vis competition on your network quality and so on capacity?
Good question. Why don't you answer it, and just clarify the time frames. We were behind competition and behind in spending, and that's for sure one of the shortfalls that we had in the past. My mother used to say, "Once fooled, shame on you. Twice fooled, shame on me." That's not something we're going to do again. Why don't you talk about Russia?
Yeah. We had an issue around 2016, 2017, where the rollout in a part of Russia was impacted by, and we're not blaming our partner for that, but it didn't work out perfectly between us and that partner. Another part of Russia worked out very well. Throughout 2017, that situation was fixed and built up speed in rollout.
You will see in 2018 and 2019, you will see good rollout speeds in Russia. You could see it in two ways. Either the relative gap is definitely being reduced. In the main places, you see a place like Moscow, we are now going towards the end of 2019 with a brand-new swapped network that we're optimizing, which is future-ready.
At some point, our competitors will also have to do the same exercise. We have good network rollout speeds today, and the period where we had a slowdown is behind us a couple of years ago.
In a previous question, somebody asked about whether or not we would use M&A in our services business, our ventures business, and the answer is yeah. M&A, I love the idea about it. It all depends on what the property is and what it costs, et cetera. We're not limited to just self-development.
We have one more question in the conference call, please. Go ahead, operator.
The next question come from line of Igor Goncharov from Gazprombank. Please ask your question.
Yes, thank you very much for the opportunity. Just a follow-up question on the dividend. As you mentioned, the new dividend policy will be applicable from the financial year of 2020. My question relates to the final dividend for the year 2019. Will this dividend be defined within the framework of progressive dividend policy, or will it be defined in a different way? Thank you.
Simple answer is that the dividend policy applies January 1st, 2020. When the board will convene to decide the amount of the final dividend or whatever it's going to be in February, concurrently with the announcement of the results, as I mentioned, clearly, there will be consideration given to the fact that we did pay an interim dividend, and there was a certain expectation from the market on the amount of dividend to be still paid. That will become again, part of the new policy and decision-making by the board within the framework of the new dividend policy.
We can go down this track of question for hours and hours and hours. Clearly, we can't predict what the board is going to say. One of the great news about our board is we have a large shareholder on it as well, so their interests are fairly aligned with the rest of the shareholder interests. We should just pay attention to that. We'll talk to them about it, and they'll tell us really quickly in February what the final dividend will be.
Okay. Thank you very much.
You got the mic, and then I'll go to you, and then to, I can't remember who was over there.
Thank you. Alexander Branis, Prosperity Capital Management. I have two questions. First one is on your capital market strategy, if you have given any further thinking towards making any changes which will maybe make VEON more eligible for any index, which would make the stock more attractive for a wider range of investors. Number two, can you remind us, please, if there's an equity-linked component in the management compensation plans for share options or something similar? Thank you.
Do the first, I'll take the second.
Well, the first one, Sasha, is very simple. If we have decided, we would have communicated. We have not. Having said that, this is clearly a priority. We are evaluating those possibilities and looking at what can be done in this regard. We are not taking that lightly. It is important for us that we are trading on a relevant-to-our-investors exchange.
On the compensation plan for the executive team, not just for everybody, but for the executive team for sure, there is not an equity payout, but there's a portion of the compensation that's based on equity progress. Yes.
There was a question there.
Yeah, we'll get to him.
Hi, Alan Burkitt-Gray from Capacity Media. You mentioned, Kjell, I think there was some fiber and tower issues in Bangladesh. Could you say a bit more about what they are?
Yeah. There are some regulatory constraints with respect to building out fiber optic cables in Bangladesh. We cannot freely build them out as a mobile operator the way we do in many other countries. There are specific companies named that have the opportunity to do that kind of work.
The same applies to towers, where there are four companies that have a license for setting up tower companies. Now, this applies to new constructions of towers. We are still operating our current towers, but if we, for example, were to change, we were to sell towers, we would not be able to take them back in again.
That is a flexibility that gets lost there. In another market, you can, of course, make an agreement with someone, and then you can change your mind five years later and pull them back in again. In Bangladesh, if you let something go there, you have to be prepared that you can't in-source it again.
For clarity, that's for everybody in the market.
Yeah
It's not just for us.
Yeah.
It's the way that the market-
It's overall.
is run. Yeah.
It kind of works.
Yeah. Yeah. Does its thing. You, and then you.
Thank you. Alastair Jones from New Street Research. Just a sort of hypothetical situation. You talked earlier, Alex, about wanting to see real EBITDA growth in your markets. If we look at Russia at the moment, it's under pressure, as you say, with the competitive pressures on pricing, et cetera.
Hypothetically, if you look in a year's time or, I don't know, 18 months or whatever, and you're seeing similar pressures, because I think a lot of the pressures are driven by your competitors, you would think, rather than necessarily yourselves.
If you're in that situation, how do you think about capital allocation at that time? Do you increase the amount of capital to become more competitive against the other operators? Do you see that as us being the returns are less attractive, so you pull capital out of that?
Just trying to understand how you think about that. Just secondly, sorry to bring it back to the licenses. Obviously, it has an implication for dividends, but we obviously had Bangladesh and Ukraine, which are big license payments recently.
Pakistan is obviously coming up. Any sort of feedback on what's going on there with the court case? In terms of other markets, Uzbekistan, I don't know about Russia and 5G. What are your expectations in terms of upfront payments in the next couple of years?
On the CapEx allocation for the businesses, clearly we start off with a minimum needed to run the business. Then we start more of a competitive allocation based on what we think is the right level overall for the group. We use the models that Alex showed you to see what kind of returns we get. I think it's important to see it a little bit more over the cycle, because you have to have a view on whether these competitive pressures are short-lasting, long-lasting.
In some of the markets, you can't really throttle it too much, even if you see that there is a competitive pressure. Actually, the competitive pressure that we see now in Russia with unlimited price plans, they pressure the ARPU and maybe also the EBITDA because you can't drive the prices, but they also drive our volumes.
If you then throttle the CapEx too much, then you completely put your competitive position in a very precarious situation. It's very hard to answer in very clear cut terms how that goes. We would need to kind of put it into a more complicated matrix of seeing how we allocate. We do make very active decisions about markets, and it's not like they all get a similar amount of CapEx per year, for sure.
There are clear variations within the group, and that can rotate sort of over time, depending on the needs. On the license in Pakistan, yes. It is very clear, known that we have a little bit of a different opinion with the Pakistani government what the price should be for that license.
Since it was difficult to come to a clear understanding, we are of course in court around that. I don't think I want to say much more about that, except from that it's ongoing. We think we have good arguments, but at the end of the day, there are two sides to the story. When it comes to the other ones, 5G will be, of course, coming up in Russia.
You see the latest initiatives are more around these consortiums, and there is a lot of speculation around what's going to happen to 3.4-3.8, which will be the spectrum that everyone is interested in. There is talk about some auction of the higher bands, the millimeter bands. Looking back to when we were looking for this for Italy, of course, that's a completely different ballgame when you are in those.
They have much more limited usability, so the numbers will be significantly smaller. I think it's still premature to have a strong opinion about how 5G will come up in Russia in terms of the format and how much of this will be cleaned up and made available to the industry. In all fairness, what is one common denominator for most of our market is that there is no rush with 5G.
There is no need to push this too fast. It will take some time before devices are at a level where it will be convenient for most customers and consumers in these markets to buy the devices. We are in the midst of a heavy rollout of 4G, so it probably would be good for the industry if this is not rushed.
I think we've probably got time for last couple of questions.
Hi, Andrej here from EBS. Two questions from me, please. Regarding your FMC strategy in Russia, this is something that you focus on quite clearly. With the landscape and FMC specifically changing quite a bit in that market, how is your strategy changing and reflecting those changes?
The second question, regarding Bangladesh, both of your competitors, or there have been some pretty steep fines in relation to both of your competitors. How safe or not do you feel regarding those?
Beeline has been the leader of FMC in Russia for. This is not something new. This is a strategy that has been pursued for several years. I do remember when we crossed the 1 million milestone of FMC customers. We have, over the last couple of years, allocated specific funds to build more FTTB connections that can be used for FMC purposes.
We're still executing on that. We will continue developing FMC in Russia. There is nothing that has changed dramatically around FMC, except from the fact that, of course, Rostelecom and Tele2 are very likely to look into these options going forward. When it comes to the environment in Bangladesh, this is not something new. There have been multiple cases of fines and tax cases in the industry, some of them also involving us.
These things have had a tendency of sorting themselves out over time. I wouldn't want to comment on what the two other competitors are experiencing right now. I just want to emphasize that this is not something new. The industry has been able to work through these issues in the past.
It's one of the reasons why we call them frontier as well.
Yes.
It's pretty unpredictable. Last. Are we down to our last, Nik, or last?
Yeah, I think we take one more.
One more.
The last question?
So we'll do-
Yeah, two.
do the last two.
Svetlana Sukhanova with Sberbank CIB . May I come back to Russia, may I come back please, especially to Beeline TV in Russia. You gave us interesting number, $25 million come from Beeline TV. Can you please disclose to us what's the growth for that kind of Beeline TV in RUB terms year-over-year in the first half of the year?
Can you also explain to us a little bit, from what I understand, it's pretty much FTTB rather than OTT service. My concern is that given the speed of how quickly the OTT TV services in Russia are being developed, that that kind of service which you do provide might be disrupted. Questions about growth and what's actually the services and your future growth outlook. Thank you.
Do we have George, maybe?
Yeah.
George, would you say a little bit about FTTB in Russia without disclosing things that we have not told the market?
Yes. Thanks a lot. Beeline TV contains both FTTB and OTT services within it. We have customers who are using fixed network access and customers who are using mobile network access, our customers and customers of other networks. From this perspective, it's both fixed network proposition, which enables fixed strategy, and it also enables full OTT service.
This is on one side. On your comment, which you mentioned specifically in respect to the other OTT players, our strategy is built on the partnerships. Right now, within My Beeline applications, we already have in-commercial operation, full integration with ivi, full integration with Amediateka, and full integration with Start. Those are three main OTT service providers in Russia, and they're already fully integrated as a part of My Beeline. That's why our strategy is built on really addressing both our own fixed FMC and OTT services.
It's growing
It's growing very fast.
Let's put it that way.
He answered that correctly, which is that we have not yet disclosed all of the detail underneath offerings like Beeline TV.
Alex.
Alex. I call him Ax for two days in a row so far. That Alex talked about is that we do have a set of KPIs that we are going to start to be more transparent about, and this is clearly one of the areas that we'll look at giving you more information. We had one last.
It was
Thanks. Just want to ask on Algeria, one of the other frontier markets, and the topic of put and call options. Is it a little bit too early for you to be thinking about that at this point, or do you operate under a sort of base case that this is a stable setup that works for both parties, given how long you took to get into that setup as well? Just any comment there would be helpful.
Let me start by saying it's not too early for us to look at things, that's for sure. That's part of what we do for a living, is to make sure that we are prepared for things. I don't think there's anything else that you have to say about it. I'm not sure, but is there anything else you want to say?
No. There are certain things that we, at specific times, are talking to the Algerian government about as per agreement, and we have points of interaction. I don't think there is much more we can say at this stage on where that's going.
If I can just ask, you also have a diverse range of countries that you operate in. It sounds like you are open-minded in a few places. When do you get to the point that those number of countries becomes too small and you lose the benefits of the diversification? Just how do you think about that overall?
As long as these businesses fund themselves, there is no rush about it. Of course, I would allocate more time to Russia than I allocate to a country that has 1% of the revenues of Russia. That is clear. It's not prohibitive for us to manage this group of companies. After all, we're talking about 10 companies with its own management team. There is a limit to how much interaction you really need to allocate, as long as it's business as usual.
Right. We spent time speaking about five of them today. Five at the top end and then two, so seven of the 10. As Kjell says, we don't spend a lot of time on the others. They have great management teams.
One of the things that we focused on last year, Kjell did a great job in assuring that every country had a fit for purpose management team. We are definitely open to talk to people about some of the assets that we have, but we're not rushing to the door on any of them.
Okay. Thank you.
Are we done?
Yeah.
That's the last question. Thank you very much. We have some time for-
Outside
the demos across the hall. The management team will be there as well. They've been taught to not say anything that we haven't said already, so engage them. Thank you.
Thank you.
Thank you very much. Thank you.